Summary of Key Points from the Conference Call Industry Overview - **Industry Focus**: Semiconductor industry, particularly AI and memory sectors - **Investment Outlook**: Preference for AI-related investments over non-AI, with both logic and memory segments deemed attractive [5][8][74] Core Insights and Arguments - **Top Investment Picks**: - AI: TSMC (Top Pick), SMIC, Aspeed, MediaTek, Alchip, GUC, KYEC, ASE, FOCI, ASMPT, AllRing - Memory: Winbond (Top Pick), Phison, Nanya Tech, APMemory, GigaDevice, Macronix [5] - **Long-term Demand Drivers**: - **Tech Inflation**: Anticipated price elasticity affecting demand for tech products, with rising costs in wafers, OSAT, and memory impacting margins for chip designers into 2026 [5] - **AI Cannibalization**: AI's potential to replace certain jobs may weaken demand, while the semiconductor supply chain is prioritizing AI semiconductors over non-AI [5] - **Tech Diffusion**: Reacceleration of AI semiconductor demand driven by generative AI, expanding into various sectors like robotics and AI glasses [5] - **China AI Demand**: DeepSeek's influence on inferencing AI demand raises questions about the sufficiency of domestic GPU supply [5] Financial Metrics and Valuation - **Valuation Comparisons**: - TSMC's target price is set at 1,888.0 TWD, indicating an 11% upside potential [6] - UMC's target price is 52.5 TWD, with a 0% upside [6] - SMIC's target price is 80.0 HKD, with a 5% upside [6] - **P/E Ratios**: - TSMC's P/E ratio is projected to decrease from 26.1 in 2025 to 16.3 in 2027, indicating expected growth [6] - UMC's P/E ratio is relatively stable, while SMIC's is not measurable due to expected losses [6] Market Dynamics - **Semiconductor Cycle**: Logic semiconductor foundry utilization is at 70-80% in the first half of 2026, indicating a recovery phase [10] - **Non-AI Semiconductor Growth**: Excluding NVIDIA's AI GPU revenue, non-AI semiconductor growth was only 10% year-over-year in 2024 [12] - **Memory Prices**: Memory stock prices are seen as leading indicators for logic semiconductors, with an attractive industry view on global tech semiconductors [14] Additional Insights - **AI Semiconductor Growth**: TSMC's AI semiconductor revenue is expected to grow at a CAGR of 60% from 2024 to 2029 [25] - **Cloud Capex**: Major cloud service providers' capex is projected to reach nearly US$632 billion in 2026, indicating robust demand for cloud-related semiconductors [78] - **NAND and NOR Flash Supply**: Anticipated shortages in NAND and NOR flash memory due to increased demand from AI storage solutions [64][68] This summary encapsulates the key points discussed in the conference call, highlighting the semiconductor industry's current landscape, investment opportunities, and financial metrics.

Investment Rating - Industry view is cautious [1] Core Insights - The report highlights a cautious outlook for the semiconductor industry, particularly in the context of AI and memory sectors, with a focus on potential recovery in the second half of 2025 impacted by tariff costs [7] - Long-term demand drivers include the reacceleration of AI semiconductor demand due to generative AI, which is expected to proliferate across various verticals outside the semiconductor industry [7] - The report indicates that the global semiconductor revenue peaked in the third quarter of 2024, with a forecasted decline in semiconductor exports from Korea since February 2025 [12][19] Summary by Sections Semiconductor Market Dynamics - The cyclical downturn is characterized by a shift from euphoria to pessimism, as indicated by the SOX Index performance [8] - Historical data shows that declines in semiconductor inventory days have historically signaled positive stock price appreciation [41] - The report notes that the domestic GPU supply chain may face dilution due to shipments of NVIDIA B30, impacting inferencing AI demand [7] Memory and Logic Cycles - Memory stock prices are seen as leading indicators for logic semiconductors, with the report suggesting that memory share price peaks lead logic semis [42][43] - The report forecasts a significant increase in HBM (High Bandwidth Memory) market size, projecting it to reach US$64 billion by 2027, with a CAGR of 107% from 2023 to 2027 [67] AI and Technology Trends - The report emphasizes the shift in value from hardware to application in the AI investment stack, indicating a growing focus on software and application development [73] - It is projected that local GPU revenue in China could grow to RMB 287 billion by 2027, driven by advancements in local manufacturing capabilities [90]